Stocks and US Futures Subdued Before Key Jobs Data: Markets Wrap

(Bloomberg) — European stocks and Wall Street equity futures struggled to maintain gains on Friday as traders braced for US jobs data due later that will help chart the path forward for Federal Reserve monetary tightening.

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The Stoxx Europe 600 Index was steady, buoyed in part by Shell Plc, which rose after reporting higher gas-trading earnings in the final quarter of last year. S&P 500 contracts erased an advance to be little changed, while those on the Nasdaq 100 slipped. Tesla Inc. fell in New York premarket trading after making another round of price cuts for its electric vehicles in China.

In Asia, a gauge of the region’s stocks rose in the first week of trading in 2023 amid measures by China to boost its economy.

Treasury 10-year yields steadied after climbing for the first time this week on Thursday following comments from Fed officials. The dollar strengthened, while the yen fell to levels not seen in a week, after the Bank of Japan unveiled further unscheduled bond buying to control its yield curve.

Estimates for US nonfarm payroll numbers peg a decline in new jobs added, indicating a cooling in the labor market that would in turn reduce the need for higher interest rates. However, private payrolls figures out on Thursday surpassed estimates and a surprise drop in new claims for unemployment benefits underscored a robust jobs market.

“What the Fed really wants to see is some slack build up in the labor markets, in hopes it can do this gently without creating much of a downturn,” Raghuram Rajan, a former governor of India’s central bank, said on Bloomberg Television. “But it may well be that by the time it seems that it will have raised rates enough, that the momentum takes us down to a mild recession at the very least.”

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Market pricing for US interest rates to peak in June increased to above 5% following comments from Atlanta Fed President Raphael Bostic, who said the central bank still has “much work to do” to tame inflation. St. Louis Fed President James Bullard, who is no longer a voting member of the Federal Open Market Committee, said rates were approaching a sufficiently restrictive zone and that inflation expectations had retreated, offering investors some optimism.

There are growing signs of pressure on technology companies, with Samsung Electronics Co. the latest to report on a demand slump resulting in a 69% plunge in operating profit. Shares in the South Korean giant rose as speculation mounted the hit to earnings would prompt the company to reduce capital expenditure.

Meanwhile, Citigroup Inc. strategists said European stocks are better prepared than their pricey US peers for a slide in earnings that’s set to take place this year. A team led by Robert Buckland raised European equities to overweight on Friday, saying valuations already discount a 15% drop in earnings. At the same time, they cut US shares to underweight on the grounds that earnings expectations are still too optimistic.

Oil stabilized after a string of declines that wiped nearly 10% from the price of crude. The price of gold increased after retreating Thursday from a six-month high reached earlier in the week.

Key events this week:

• Eurozone retail sales, CPI, consumer confidence, Friday

• Germany factory orders, Friday

• US nonfarm payrolls, factory orders, durable goods, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 9:15 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures fell 0.2%

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index was little changed

• The MSCI Emerging Markets Index rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro was little changed at $1.0516

• The Japanese yen fell 0.7% to 134.39 per dollar

• The offshore yuan rose 0.3% to 6.8677 per dollar

• The British pound fell 0.2% to $1.1883

Cryptocurrencies

• Bitcoin fell 0.4% to $16,783.75

• Ether fell 0.4% to $1,246.42

Bonds

• The yield on 10-year Treasuries advanced one basis point to 3.73%

• Germany’s 10-year yield was little changed at 2.32%

• Britain’s 10-year yield advanced one basis point to 3.56%

Commodities

• Brent crude was little changed

• Spot gold rose 0.2% to $1,836.01 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Tony Jordan and Richard Henderson.

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